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NEW YORK, New York – May 15, 2007 – Broadridge Financial Solutions, Inc. (NYSE:BR), a leading global provider of technology-based outsourcing solutions to the financial services industry, reported 9.4% net revenue growth and $0.30 earnings per share for the third fiscal quarter ended March 31, 2007, Richard J. Daly, chief executive officer, announced today. Pretax and net earnings from continuing operations grew 25% and 26% respectively, and diluted earnings per share from continuing operations increased 25% from $0.24 earnings per share a year ago on the same number of shares outstanding.
Third quarter net revenues grew by 9.4% to $493 million driven by internal growth from existing clients. Pretax margins of 14.2% increased 180 basis points as a result of the inherent scale and operating leverage in the business.
For the nine months ended March 31, 2007 net revenues grew by 12.3% to $1.36 billion primarily driven by internal growth and to a lesser degree by net new business. Pretax margins of 11.9% increased by 90 basis points due to scale. Earnings per share from continuing operations increased 22.4% to $0.71 for the first nine months of fiscal 2007, versus earnings per share of $0.58 in 2006.
Commenting on the results, Mr. Daly said, "We are pleased with the overall results for the quarter and they were in line with our expectations. We had strong internal growth and were able to expand margins by leveraging the inherent scale in our business. Our year-to-date results are solid as we now head into our most significant quarter of the year from both a revenue and profit perspective. Our full year results are heavily driven by our annual proxy business. Year-to-date our annual proxy revenues have been flat, and we are expecting that trend to continue into the fourth quarter. This quarter will also be impacted by the loss of certain services to two large clients. We anticipated all of this in our March pre-spin-off financial guidance and therefore we are on track to achieve our full year guidance."
Analysis of Third Quarter Fiscal Year 2007
Effective for the third quarter of fiscal year 2007, we have changed our method of determining intersegment transfer pricing. This change had no impact on our consolidated results. In the discussion below, we compare actual results for fiscal 2007 to results for fiscal 2006 that are adjusted to reflect the change in transfer pricing. We believe that this provides a more meaningful comparison between current quarter results and prior quarters. A reconciliation to fiscal 2006 results as reported is attached to this release.
Investor Communication Solutions
Net revenues in the Investor Communication Solutions segment grew to $338 million in 2007, an increase of 10% compared to fiscal 2006, as adjusted, and 9.6% compared to 2006 as reported. The increase was primarily driven by growth in Proxy and Interim Communications services, resulting from higher non-recurring activities related to mutual fund and non-annual proxy activities as well as other shareholder communications. Operating margins increased 210 basis points compared to fiscal 2006, as adjusted, and 190 basis points compared to 2006 reported as a result of a more favorable business mix associated with internal growth and higher margins earned on distribution fees.
Securities Processing Solutions
Securities Processing Solutions net revenues grew to $131 million in 2007, an increase of 7.2% compared to fiscal 2006, as adjusted, and 4.6% compared to 2006 as reported. The increase was primarily due to internal growth of both equities and fixed income processing, net new business and other one-time revenues. Operating margins increased 60 basis points compared to fiscal 2006, as adjusted, as a result of the inherent operating leverage and scale in the business. Operating margins decreased 30 basis points compared to 2006 as reported.
Clearing and Outsourcing Solutions
Clearing and Outsourcing Solutions segment net revenues grew to $23 million in 2007, an increase of 12.6% compared to 2006 on both an adjusted and, as reported basis, primarily from new business across both clearing services and outsourcing services. Operating losses were reduced to $1.1 million from a loss of $2.2 million, as adjusted, and a loss of $5.0 million in 2006, as reported, as a result of operating leverage in the business associated with bringing on new clients.
Fiscal 2007 Guidance & Directional View for 2008
At the time of its spin-off from ADP at the end of March 2007, Broadridge issued fiscal 2007 financial guidance. Today the company reconfirmed its full year financial guidance for the fiscal year ending June 30, 2007 of 7% to 9% for net revenue growth, and earnings before one-time transition costs and interest on new debt within a range of $1.42 - $1.49 per share, based on the current weighted average shares outstanding of 138.8 million shares. When including one-time transition costs and interest on new debt the earnings per share range is $1.32 - $1.38.
The directional view for fiscal 2008 is (1) 0% - 3% revenue growth, (2) a decrease of 5% - 10% in operating income, excluding one-time transition expenses, interest expense on new debt and public company expenses, and (3) margins in the range of 14.5% - 15.0%. This guidance remains unchanged. “While providing guidance this early for fiscal 2008 is not something we would normally do, because of the recent spin-off and the loss of two large clients, we believe it was and is the prudent thing to do,” said Mr. Daly.
Non-GAAP Measures
In certain circumstances, results have been presented that are non-GAAP (generally accepted accounting principles) measures and should be viewed in addition to, and not in lieu of, the company’s reported results. Reconciliations to comparable GAAP measures are available in the accompanying schedules to this release and on our company website at http://www.broadridge-ir.com.
Earnings Conference Call
An analyst conference call will be held today, Tuesday, May 15th at 8:30 a.m. EST. A live webcast of the call will be available to the public on a listen-only basis. To listen to the webcast and view the slide presentation, go to www.Broadridge.com and click on the webcast icon. The presentation will be available to download and print approximately 60 minutes before the webcast at the Broadridge Investor Relations home page at http://www.broadridge-ir.com. Broadridge's news releases, current financial information, SEC filings and Investor Relations presentations are accessible at the same website.
Broadridge Financial Solutions, Inc.
Condensed Consolidated and Combined Statements of Earnings
(In millions, except per share amounts)
(Unaudited)
Three months ended Nine months ended
March 31, March 31,
--------------------- --------------------
2007 2006 2007 2006
---------- ---------- ---------- ---------
Revenues:
Services revenues $ 477.6 $ 437.1 $ 1,320.5 $ 1,173.0
Other 21.8 17.6 61.9 53.7
---------- ---------- ---------- ---------
Total revenues 499.4 454.7 1,382.4 1,226.7
Interest expense from
securities operations 6.6 4.2 18.2 11.5
---------- ---------- ---------- ---------
Net revenues 492.8 450.5 1,364.2 1,215.2
---------- ---------- ---------- ---------
Cost of net revenues 375.1 348.4 1,050.9 935.3
Selling, general and
administrative expenses 47.6 45.0 149.2 144.1
Other expenses, net 0.2 1.3 1.8 1.9
---------- ---------- ---------- ---------
422.9 394.7 1,201.9 1,081.3
Earnings from continuing
operations before income taxes 69.9 55.8 162.3 133.9
Provision for income taxes 28.0 22.5 63.9 54.0
---------- ---------- ---------- ---------
Net earnings from continuing
operations 41.9 33.3 98.4 79.9
Income (loss) from discontinued
operations, net of provision
(benefit) for income taxes of
$0.2 million and $(8.9)
million for the three and nine
months ended March 31, 2006,
respectively -- 0.3 -- (13.9)
---------- ---------- ---------- ---------
Net earnings $ 41.9 $ 33.6 $ 98.4 $ 66.0
========== ========== ========== =========
Basic and diluted earnings per
share:
Basic and diluted earnings
per share from continuing
operations $ 0.30 $ 0.24 $ 0.71 $ 0.58
Basic and diluted loss per
share from discontinued
operations -- -- -- (0.10)
---------- ---------- ---------- ---------
Basic and diluted earnings
per share $ 0.30 $ 0.24 $ 0.71 $ 0.48
========== ========== ========== =========
Weighted-average shares
outstanding:
Basic and diluted 138.8 138.8 138.8 138.8
Broadridge Financial Solutions, Inc.
Condensed Consolidated and Combined Balance Sheets
(In millions, except per share amounts)
March 31, June 30,
2007 2006
--------- ---------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 43.2 $ 50.1
Cash and securities segregated for regulatory
purposes and securities deposited with clearing
organizations 143.2 40.3
Accounts receivable, net 371.4 404.2
Securities clearing receivables 940.3 836.8
Other current assets 115.5 74.5
--------- ---------
Total current assets 1,613.6 1,405.9
Property, plant and equipment, net 73.5 80.7
Other non-current assets 126.1 111.3
Goodwill 479.8 480.4
Intangible assets, net 33.3 56.4
--------- ---------
Total assets $ 2,326.3 $ 2,134.7
========= =========
Liabilities and Stockholders? Equity
Current liabilities:
Accounts payable $ 83.1 $ 78.4
Accrued expenses and other current liabilities 183.7 172.9
Securities clearing payables 732.8 613.6
Deferred revenues 37.0 9.5
Notes payable to affiliated parties -- 115.9
Short-term borrowings 331.0 --
--------- ---------
Total current liabilities 1,367.6 990.3
Long-term debt 440.0 --
Other non-current liabilities 50.3 59.4
Deferred revenues 42.9 41.8
--------- ---------
Total liabilities 1,900.8 1,091.5
--------- ---------
Commitments and contingencies (Note 14)
Stockholders? equity:
Parent company?s net investment -- 998.0
Preferred stock: Authorized, 25.0 shares; issued and
outstanding, none -- --
Common stock, $.01 par value: Authorized, 650.0
shares; issued and outstanding, 138.8 shares at
March 31, 2007 1.4 --
Additional paid-in capital 402.4 --
Accumulated other comprehensive income 21.7 45.2
--------- ---------
Total stockholders? equity 425.5 1,043.2
--------- ---------
Total liabilities and stockholders? equity $ 2,326.3 $ 2,134.7
========= =========
Broadridge Financial Solutions, Inc.
Segment Results
(In millions)
(Unaudited)
Net revenues
------------------------------------------
Three months ended Nine months ended
March 31, March 31,
--------------------- --------------------
2007 2006 2007 2006
---------- --------- --------- ---------
Investor Communication
Solutions $ 337.5 $ 308.0 $ 929.5 $ 820.1
Securities Processing Solutions 131.2 125.4 369.6 349.9
Clearing and Outsourcing
Solutions 23.2 20.6 68.2 58.1
Other 0.1 (4.3) (7.9) (12.6)
Foreign exchange 0.8 0.8 4.8 (0.3)
---------- --------- --------- ---------
Total $ 492.8 $ 450.5 $ 1,364.2 $ 1,215.2
========== ========= ========= =========
Earnings from Continuing
Operations before Income
Taxes
------------------------------------------
Three months ended Nine months ended
March 31, March 31,
-------------------- --------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Investor Communication
Solutions $ 31.1 $ 22.4 $ 73.3 $ 65.1
Securities Processing Solutions 42.4 40.9 106.6 96.3
Clearing and Outsourcing
Solutions (1.1) (5.0) (11.3) (20.8)
Other (2.6) (2.9) (7.9) (6.7)
Foreign exchange 0.1 0.4 1.6 (0.0)
--------- --------- --------- ---------
Total $ 69.9 $ 55.8 $ 162.3 $ 133.9
========= ========= ========= =========
Broadridge Financial Solutions, Inc.
Intersegment Transfer Price Reconciliation
(Unaudited)
Three months ended
March 31
=====================
($ in millions) FY '07 FY '06
========= =========
Investor Communication Solutions
Net revenue as reported - GAAP 337.5 308.0
Transfer pricing adjustment - (1.3)
--------- ---------
Net revenue as Adjusted - Non-GAAP 337.5 306.7
--------- ---------
EBIT as reported - GAAP 31.1 22.4
Transfer pricing adjustment - (0.7)
--------- ---------
EBIT as Adjusted - Non-GAAP 31.1 21.7
--------- ---------
Margin % as reported - GAAP 9.2% 7.3%
Margin % as adjusted - Non-GAAP 9.2% 7.1%
========= =========
Securities Processing Solutions
Net revenue as reported - GAAP 131.2 125.4
Transfer pricing adjustment - (3.0)
--------- ---------
Net revenue as Adjusted - Non-GAAP 131.2 122.4
--------- ---------
EBIT as reported - GAAP 42.4 40.9
Transfer pricing adjustment - (2.1)
--------- ---------
EBIT as Adjusted - Non-GAAP 42.4 38.8
--------- ---------
Margin % as reported - GAAP 32.3% 32.6%
Margin % as adjusted - Non-GAAP 32.3% 31.7%
========= =========
Clearing and Outsourcing Solutions
Net revenue as reported - GAAP 23.2 20.6
Transfer pricing adjustment - -
--------- ---------
Net revenue as Adjusted - Non-GAAP 23.2 20.6
--------- ---------
EBIT as reported - GAAP (1.1) (5.0)
Transfer pricing adjustment - 2.8
--------- ---------
EBIT as Adjusted - Non-GAAP (1.1) (2.2)
--------- ---------
Margin % as reported - GAAP -4.7% -24.3%
Margin % as adjusted - Non-GAAP -4.7% -10.7%
========= =========
Broadridge Financial Solutions, Inc.
Earnings from Continuing Operations
Excluding Transition Costs
(Unaudited)
MAY 15th EARNINGS CALL GUIDANCE
$ in millions, reflects
continuing operations
------------------------------------------
Actual Forecast Forecast
FY06 FY07E FY08
------ --------------- --------------
Broadridge Net Revenues 1,933 2,070 - 2,100
Growth % 12.6% 7% - 9% 0.0 - 3.0 %
ADP Segments Earnings before
Taxes 309 346 - 361
Margin % 16.0% 16.7% - 17.2%
Adjustments:
Stock Compensation (24) (24)
ADP Royalties/Corporate (35) (35)(4)
ADP Corporate Charges 40 40
Foreign Exchange 7 4
Other 6 (1)
------ ---------------
Total Adjustments (6) (16) -
Broadridge PF Earnings Before
Royalties Add Back,
Public Company Costs, ------ --------------- --------------
Interest and Taxes (1) 303 330 - 345 -
====== =============== ==============
Margin % 15.7% 15.9% - 16.4% 14.5 - 15.0 %
Growth % 10.5% 9.0% - 14.0% (10.0) - (5.0)%
ADP Royalties - - 35
Broadridge PF Earnings Before
Public Company Costs, ------ --------------- --------------
Interest and Taxes 303 330 - 345
====== =============== ==============
Total Public Company Costs(2) (30)
Broadridge PF Earnings Before ------ --------------- --------------
Interest and Taxes 303 330 - 345
====== =============== ==============
Margin % 15.7% 15.9% - 16.4% 14.7% - 15.3 %
Interest on New Debt (10) (38)
Broadridge PF Earnings Before ------ --------------- --------------
Taxes 303 320 - 335
====== =============== ==============
Income Taxes at 40% (122) (128) - (134) 40 %
Broadridge PF Net Income ====== =============== ==============
(before transition costs) 181 192 - 201
====== =============== ==============
After-Tax Margin % 9.4% 9.3% - 9.6%
------ --------------- --------------
Note: One-time transition
costs excluded in the above - 9 5 - 10
------ --------------- --------------
Earnings Per Share before
One-time transition Costs &
Interest (3) $ 1.30 $ 1.42 - $ 1.49
Growth % 9.2% - 14.6%
Earnings Per Share after
One-time transition Costs &
Interest $ 1.30 $ 1.32 - $ 1.38
Growth % 1.5% - 6.2%
Notes:
(1) Combination of ADP reporting segments: Brokerage Services and
Securities Clearing and Outsourcing Services.
FY'07 forecast prepared in accordance with the same accounting policies
as described in the Form 10.
(2) FY'08 normalized to reflect full year effect of corporate departments
and increased benefits and insurance costs.
(3) Total shares outstanding equals 139 million
(4) Estimated $8m in corporate expense for Q407, and $27m in Royalty
Charges
Forward-Looking Statements
This press release and other written or oral statements made from time to time by representatives of Broadridge may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature, such as our fiscal year 2011 financial guidance, and which may be identified by the use of words like “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could be” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. These risks and uncertainties include those risk factors discussed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2010 (the “2010 Annual Report”), as they may be updated in any future reports filed with the Securities and Exchange Commission. Any forward-looking statements are qualified in their entirety by reference to the factors discussed in the 2010 Annual Report. These risks include: the success of Broadridge in retaining and selling additional services to its existing clients and in obtaining new clients; the pricing of Broadridge’s products and services; changes in laws and regulations affecting the investor communication services provided by Broadridge; declines in participation and activity in the securities markets; overall market and economic conditions and their impact on the securities markets; any material breach of Broadridge security affecting its clients’ customer information; the failure of Broadridge’s outsourced data center services provider to provide the anticipated levels of service; any significant slowdown or failure of Broadridge’s systems or error in the performance of Broadridge’s services; Broadridge’s failure to keep pace with changes in technology and demands of its clients; Broadridge’s ability to attract and retain key personnel; the impact of new acquisitions and divestitures; and competitive conditions. Broadridge disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
To contact media relations, please email us at mediarelations@broadridge.com.
